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A month since Britain suffered its first downgrade when Moody’s lowered its AAA rating by one notch, Fitch showed it was poised to follow suit by placing the rating on review for possible downgrade.

It said it saw a heightened possibility of a cut. A decision on the rating level is due by the end of April, Fitch said in a statement.

Sterling fell sharply after the announcement, dropping half a cent against the dollar.

The review comes hard on the heels of the government’s annual budget this week, which halved Britain’s growth forecast for this year and raised borrowing projections.

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The move by Fitch was not unexpected but will be another setback for finance minister George Osborne who has staked his reputation on repairing Britain’s public finances and had promised to protect its triple-A rating.

Britain’s finance ministry said its economic policy was on the right track and Fitch’s warning underlined that “there are no easy answers to problems built up over many years”.

“But we are, slowly but surely, fixing our country’s economic problems,” a Treasury spokesman said, citing a reduction by one third of the budget deficit and the creation of 1.25 million jobs since the government took office in 2010.

Fitch first warned that Britain’s rating was under threat in March 2012 when it noted debt levels were already “significantly above the AAA median” and the government had very limited room for to manoeuvre.

Since then, the economic outlook has deteriorated, pushing the government’s deficit-reduction strategy further off course.

Osborne’s budget statement on Wednesday included a halving of estimated economic growth this year to just 0.6 per cent.

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